During the last few years several reform measures have been taken with regard to the working of secondary market.
Let’s look at some of these important changes…
Rajiv Gandhi Equity Savings Scheme:
On 23rd November 2012, the government notified a new tax saving scheme called the Rajiv Gandhi Equity Savings Scheme (RGESS), exclusively for the first-time retail investors in the securities market.
This scheme provides 50 % deduction (from taxable income) of the amount invested for that year to new investors who invest up to INR 50,000 and whose annual income is below INR 10 lakh. The operational guidelines were issued by SEBI on 6 December 2012.
http://www.bseindia.com/rgess/downloads/SEBI_Notification_December_6_2012.pdf
Electronic Voting Facility made mandatory for top listed companies:
As mandated in the Union Budget 2012-13 for top listed companies to offer electronic voting facility to their shareholders, SEBI has come out with the necessary amendments in this regard on 13 July 2012, to be incorporated in the equity listing agreement by stock exchanges.
To make a beginning, based on market capitalization, electronic voting is now mandatory for the top 500 listed companies at the BSE and NSE, in respect of those businesses to be transacted through postal ballot.
SME Exchange/Platform:
Separate trading platforms for SMEs were launched and became functional at the BSE and NSE in March 2012 and September 2012 respectively. As on 14 January 2013, the number of equities listed on the BSE and NSE SME platforms is 12 and 2 respectively.
Reduced Securities Transaction Tax for cash delivery transactions:
Following the announcement in Union Budget 2012-13, the rate of the securities transaction tax (STT) has been revised downwards by 20% to 0.1% from 0.125% for delivery-based transactions in the cash market, effective 1 July 2012.
Regulatory framework for governance and ownership of stock exchanges, clearing corporations, and depositories:
Based on the recommendations of the Dr. BimalJalan Committee, new Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations 2012 were notified on 20 June 2012 to regulate recognition, ownership, and governance in stock exchanges and clearing corporations.
Further, the Securities and Exchange Board of India (Depositories and Participants) (Amendment) Regulations 2012 have been brought into effect from 11 September 2012 to regulate ownership and governance norms of depositories.
Expansion of Qualified Foreign Investors (QFIs) Scheme:
In Budget 2011-12, the government, for the first time, permitted qualified foreign investors (QFIs), who meet the know-your-customer (KYC) norms, to invest directly in Indian MFs. In January 2012, the government expanded this scheme to allow QFIs to directly invest in Indian equity markets.
Taking the scheme forward, as announced in Budget 2012-13, QFIs have also been permitted to invest in corporate debt securities and MF debt schemes subject to a total overall ceiling of US $ 1 billion. In May 2012, QFIs were allowed to open individual non-interest-bearing rupee bank accounts with authorized dealer banks in India for receiving funds and making payment for transactions in securities they are eligible to invest in. In June 2012, the definition of QFI was expanded to include residents of the member countries of the Gulf Cooperation Council (GCC) and European Commission (EC) as the GCC and EC are the members of the Financial Action Task Force (FATF).
Initiatives to attract FII Investment:
As regards FII investment in debt securities, there has been progressive enhancement in the quantitative limits for investments in various debt categories. In June 2012, the FII limit for investment in G-Secs (government securities) was enhanced by US $ 5 billion, raising the cap to US $ 20 billion. The scheme for FII investment in long-term infra bonds has been made attractive by gradual reduction in lock-in and residual maturity periods criteria.
In November 2012, the limits for FII investment in G- Sees and corporate bonds (non-infira category) have been further enhanced by $ 5 billion each, taking the total limit prescribed for FII investment to US $ 25 billion in G-Secs and US $ 51 billion for corporate bonds (infra + non-infra). FII debt allocation process has also been reviewed for bringing greater certainty among foreign investors and helping them periodically re-balance their portfolios in sync with international portfolio management practices.